Everyone Wants to Avoid Probate - Why?

Everyone Wants to Avoid Probate

The probate process is important to ensuring that the estate of someone who dies is properly handled by paying off all creditors involved, paying all taxes, and distributing the remainder to the heirs and beneficiaries of the estate. 

However, it is widely known that the probate process can be slow, often tying up the decedent's assets and properties for months and often years at a time. 

Probate can often be a costly process too, with fees mounting up that can drain a considerable percentage of assets in any estate. 

For both of these reasons, many people want design their financial affairs so that their heirs and loved ones do not have to give money away to the probate process, and can receive their inheritances much quicker.

There are several ways to protect your money from the pitfalls of probate. 

Joint Ownership with Rights of Survivorship
When you set up property with joint ownership with rights of survivorship, any assets or moneys will automatically pass to the surviving owner upon the death of the first owner.  This type of ownership of property is called "joint tenancy" and just means that more than one person owns the property and if one partner dies, the other person has the right to the larger share of the property.  This method often works when couples acquire property together, whether its real estate, bank accounts, securities, or any other property of value.

Beneficiary Designations
If you want to protect your money, another way to avoid probate is with beneficiary designations.  These can be made under several different types of accounts.  You can set up life insurance policies, retirement funds, and IRAs to pass directly to the beneficiary.  Because these accounts are set up contractually to pay out death benefits, they are exempt from needing to go through the probate process.

Payable on Death (POD) Bank Accounts
These types of bank accounts are effective ways to avoid probate because any money in a POD passes directly to the beneficiary upon the death of the account owner.  Another good thing about a POD account is that the original account owner retains the right to change the beneficiary to the account as any time.

Transfer on Death (TOD) Securities
This method works much the same way as a POD, except it is for the transfer of stocks, bonds, or brokerage accounts of any sort.  After a person sets up a TOD account, he or she retains ownership of the stock or bond and can change the beneficiary at any time.

Revocable Living Trusts
A revocable living trust can be set up to hold the title to a property to benefit an individual.  The title to the property is held in the name of a trustee and a beneficiary is named for the property.  Because the ownership of the property is set up this way, it is not considered part of the estate that will go through probate.  The trust document tells the trustee what to do with the property upon the death of the owner.

The process of avoiding probate can be tricky and can require advanced planning and perhaps guidance from experts in the field.  If you are considering looking for ways to avoid probate, then you should consult an estate planning attorney who will help you to explore all of the options.